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- As bitcoin’s surge continues, some bitcoin (BTC, -0.96% ) miners are hanging on their mining rigs in the hopes of selling them at a better price
- Vincent Vuong, director of sales and procurement at bitcoin mining and hosting business Compass Mining, stated, that he knows there is supply available, he also spoke with quite a few folks
- Bitmain and MicroBT, for example, allow their customers to pre-order mining rigs and hold futures contracts for batches of equipment that will be delivered at a future date
As bitcoin’s surge continues, some bitcoin (BTC, -0.96% ) miners are hanging on their mining rigs in the hopes of selling them at a better price. Vincent Vuong, director of sales and procurement at bitcoin mining and hosting business Compass Mining, stated that he knows there is supply available, he also spoke with quite a few folks. They all have tens of thousands of units, but no one wants to sell them. Mining rig prices fell due to China’s ban on crypto mining a few months ago, but owing to bitcoin’s current bull run, the machines are now trading at a premium. Bitcoin has experienced some of its biggest increases this year in recent weeks, increasing dealers’ confidence in the machines’ future values.
Bitmain and MicroBT, for example, allow their customers to pre-order mining rigs and hold futures contracts for batches of equipment that will be delivered at a future date. As the coronavirus epidemic has delayed global operations and caused a supply chain bottleneck for components to manufacture the machines, this technique has grown increasingly frequent.
Major chip suppliers, such as Taiwan Semiconductor Manufacturing Co., have very modest quotas for certain chips for bitcoin mining equipment producers, which has led to the practice. According to industry experts, mining machine costs have already risen significantly in both futures and spot markets, indicating miners’ positive predictions for the largest cryptocurrency’s price. As a result, a lively futures contracts market has developed for miners, brokers, and speculators, who trade depending on bitcoin prices and other factors that impact equipment profitability, such as power costs.
The mining machine futures market is one of the key bellwethers for bitcoin’s market, said Franky Hu, chief business development officer of MyRig, a miner hosting services provider located in Russia. Miners gamble on greater bitcoin prices when mining rig futures contracts trade at a significantly higher price than current pricing, resulting in a bigger profit margin. Rig prices in the secondary spot market appear to have bottomed out in July and have been rising for the past three weeks.
According to the Rig Price Index of Seattle-based mining business Luxor, prices for various mining equipment increased by 7.5 percent on average last week, the largest gain since the comeback began. According to Ethan Vera, Luxor’s chief operating officer, the increased rate of rig prices in the secondary market shows that purchasers are pricing machines based on an optimistic expectation for a bitcoin price, which may lead to larger profit margins.
The price of the rigs is determined not just by the value of the machinery, but also by the projected profitability, which is based on market opinion towards the price of the bitcoin that the machines may mine. Over the last three weeks, rig prices have outperformed bitcoin prices, demonstrating that it isn’t only about present economics, but also about future sentiment, Vera added. Bitcoin recrossed the $50,000 barrier early this week and has been gaining for five weeks in a row, its longest weekly winning streak in nine months. When the price of bitcoin rises, nobody wants to sell their machines, Vuong explained.
There is a lot of room for growth. Miners and brokers have made large gains in the past by executing well-timed transactions during bitcoin bull runs, according to Vuong.
Before last year’s bull run, for example, the S9, one of Bitmain’s earlier types of mining equipment, was selling for up to $20. Vuong claims that during the apex of the surge in late 2020, the identical computers were selling for $600 to $700, a 30 to 35-fold increase. Over time, trading mining equipment has grown increasingly strategic. Vuong even claimed that someone who traded hardware may have made more money than someone who bought and held bitcoin. Even in this short-term downturn market, some vendors are choosing to wait it out by hosting their mining rigs. This can create daily gains, giving them more time to wait for the bad market to pass, according to Vuong. Furthermore, for devices that are already connected, sellers may usually get a better sale price. He said that the machine on the shelf is more valuable than those in the warehouse.
Andrew is a blockchain developer who developed his interest in cryptocurrencies while pursuing his post-graduation major in blockchain development. He is a keen observer of details and shares his passion for writing, along with coding. His backend knowledge about blockchain helps him give a unique perspective to his writing skills, and a reliable craft at explaining the concepts such as blockchain programming, languages and token minting. He also frequently shares technical details and performance indicators of ICOs and IDOs.
